Asia Financial Holdings (HKG:662) Will Pay A Larger Dividend Than Last Year At HK$0.09

Asia Financial Holdings Limited (HKG:662) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of June to HK$0.09. This makes the dividend yield about the same as the industry average at 4.7%.

Asia Financial Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Asia Financial Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 10.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Asia Financial Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from HK$0.075 total annually to HK$0.18. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Asia Financial Holdings might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Asia Financial Holdings has impressed us by growing EPS at 11% per year over the past five years. Asia Financial Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Asia Financial Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Asia Financial Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Asia Financial Holdings that investors should take into consideration. Is Asia Financial Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.